REGINA v THOMPSON

OPINION OF MR ADVOCATE GENERAL MAYRAS

DELIVERED ON 4 JULY 1978 1

Mr President,Members ofthe Court,

I — Thanks to the very comprehensivereport for the hearing presented by theJudge-Rapporteur Your Lordshipsundoubtedly have in mind the factsgiving rise to this reference for a pre­liminary ruling by the Court of Appeal(Criminal Division) and also the wordingof the questions referred to YourLordships by that court.

The three appellants in the main actionwere charged before the Crown Court atCanterbury with having been concernedwith the illegal importation of 3 400Krugerrands into the United Kingdom.Two of them, who had between 7August 1974 and 26 May 1975 exported40.39 tonnes of coins of silver alloyminted in the United Kingdom, arecharged with conspiracy to evade theprohibition, in force at that time, on theexportation of such coins.

One of the appellants pleaded guiltybefore the court of first instance, but,subsequently, all three pleaded that therewas no case for them to answer owing tothe fact that the prohibitions relating tothe importation and exportation of thesaid coins were in conflict with the

provisions of the Treaty of Rome: Thatcourt rejected this submission withouthaving recourse to the procedure underArticle 177.

Subsequently the appellants, whilepleading guilty, appealed and the courtof second instance decided to ask Your

Lordships for a preliminary ruling.The subject-matter of the offences isgold and silver coins.

A — The gold coins are Krugerrands.They are still, at the present time, minted

in the ordinary course by the Chamberof Mines, Johannesburg, which disposesof part of the gold produced in theRepublic of South Africa in this form;they are a not inconsiderable exportfrom that country. These coins aredisposed of particularly in the FederalRepublic of Germany by InternationalGold Corporation (Inter-Gold) ofStuttgart.

The legal status of Krugerrands is asfollows: In the country where these coinsare issued they are in principle legaltender. In general a coin is only such aninstrument in the country in which it hasbeen issued. However it may happen thatit is legal tender elsewhere (this is so inthe case of the Belgian franc in theGrand Duchy of Luxembourg).Nevertheless it would be advisable to

take things as we find them: in order toobtain Krugerrands in South Africa, inquantities which are moreover limited,private individuals must register a longtime in advance and pay theconsideration in hard currencies and theyobviously do not use the Krugerrandsobtained in this way to pay for theircurrent purchases. Therefore these coinsare not in fact used "in the ordinarycourse" as legal tender.

The legal status of Krugerrands withinthe European Economic Communityseems to me to be far from clear. In

some Member States they can be freelybought and sold in unlimited quantitiessubject to payment of value-added tax(VAT) if it is due; when the events inthis case happened the basis of theassessment and the rate of the VAT

affecting these coins had not been stan­dardized. I will return later to this point.Transactions in Krugerrands, at leastwhen large quantities are involved, are in

1 — Translated from the French.

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OPINION OF MR MAYRAS — CASE 7/78

general carried out at banks which thenin fact perform the function ofcommodity exchanges similar to thosewhich exist for raw materials such as

cereals, sugar, coffee, etc.

These transactions may take the formeither of obtaining a certificate ofownership of a certain number of thesecoins which remain deposited in thevaults of the bank or of a purchaseaccompanied by actual delivery of thecoins. But in either case the transaction is

fundamentally the same.

B — As far as concerns the silver coins atissue they consist of English coins ofsixpence, one shilling, one florin (twoshillings) and half a crown (two shillingsand sixpence). None of these coins hasbeen minted since 1947 but they may stillbe used as legal instruments of paymentin the United Kingdom up to a specificamount, with the exception since 31December 1969 of half-crowns, althoughthe latter are still readily accepted by theBank of England. All these coins areactively sought after because withinflation the value of the pure metalwhich they contain exceeds their nominalvalue. In this case a total of 40.39 tonnes

is involved and the "profit netted" wouldamount to nearly one million poundssterling.

On reading the judgment of the court offirst instance and the judgment of theCourt of Appeal it appears that theappellants were simply couriers workingfor the AGOSI (Allgemeine Gold- undSilberscheideanstalt) firm of Pforzheimin the Federal Republic of Germany andperhaps for certain English firms ofbullion brokers, in particular AyrtonMetals of London.

AGOSI's field of activity covers thepurchase and sale of precious metals, therefining of these metals and theproduction of their alloys for all kinds ofuses. Forty per cent of its capital isowned by the celebrated Degussa,formerly Roessler, of Frankfurt which,

for its part, operates both in the fields ofprecious metal and also of chemicalproducts. Moreover it is a special featureof this firm that it is an authorized

banking business and carries outexchange operations. It is one of the fewundertakings whose gold and silveringots are accepted on all markets of theworld and on the bullion markets of

London, New York and Chicago.It is AGOSI which delivered the goldcoins in question to the appellants and itappears that the accused endeavoured todispose of them, or were going todispose of them, to Ayrton Metals whichno doubt would itself in turn try to sellthem to customers resident in the United

Kingdom.The silver coins were intended to be

melted down by AGOSI in order toextract the pure metal from them. Theappellants sold them to it at theprevailing market price of their silvercontent.

The appellants state that in order to paythis price AGOSI used four differentmeans of payment:

— by cheque in pounds sterling drawnon the company's account inLondon,

— in cash in German marks,

— by transfer to the bank account inLondon of one of the appellants,

— partly by using one of the above-mentioned means and partly by thedelivery of Krugerrands to one of theappellants (1 900 units).

The delivery price of the Krugerrandswas fixed on the basis of the market

price at which these coins were freelycirculating legally in the FederalRepublic of Germany.AGOSI claims that, as far as it wasconcerned, it is still the owner of theremaining 1 500 Krugerrands, since thecheques handed over by the appellants inpayment have not apparently beenhonoured.

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REGINA v THOMPSON

The Court of Appeal only gave thegrounds of its decision with reference tothe first question referred to YourLordships. As far as concerns thequestion relating to the possibleapplication of Article 36 and the scope ofthe provisions in Chapter 4 of Title III ofPart two of the Treaty of Rome, that isto say, to the free movement of capital, itis advisable to refer to the decision of thecourt of first instance.

II — The answer to the first questiondetermines the outcome of the dispute. Bythis question the Court of Appealrequests you to classify the coins inquestion, Krugerrands and English silvercoins, under Community law: in short itwould like to know whether they aregoods or capital. If under Community lawthey are goods they fall within theprovisions of Chapter 2 of Title I of Parttwo relating to the elimination ofquantitative restrictions between MemberStates and measures having equivalenteffect, which hinder the free movementof goods, both on imports (Article 30)and also on exports (Article 34), unlessthe provisions of Article 36 of the Treatyare applicable to them.

If on the other hand they are capitalwithin the meaning of Community lawthen the transfers of which the coins are

the subject-matter fall within Chapter 4of Title III (that is to say within Articles67 to 73 of the Treaty) and the EnglishCourt of Appeal would like to knowwhat was the effective scope of theseprovisions when the events which gaverise to the prosecution occurred.

I do not think that it is possible for theCourt to answer this question in thedirect form in which it has been referred.

Nevertheless I will approach the problemsquarely for reasons of clarity.

The following considerations may be putforward in support of the designation"goods".

In the first place, from the point of viewof the domestic law of the United

Kingdom, one argument can be based onthe actual wording of the provisionsrelating both to importation and expor­tation which the appellants are chargedwith having infringed.

The aim of the Import, Export andCustoms Powers (Defence) Act 1939,passed in the political situation prevailingat that time, was "to control the impor­tation, exportation and carriagecoastwise of goods and the shipment ofgoods as ship's stores, to facilitate theenforcement of the law relating to thematters aforesaid and the law relating totrading with the enemy ...".This Act is still in force vis-à-vis non-

Member States but it must be regardedas having been repealed or at leastamended by the European CommunitiesAct 1972 on the accession of the United

Kingdom in so far as it contravenes theprovisions of the Treaty of Rome.Statutory Instrument No 23 of 1954entitled "The Import of Goods (Control)Order 1954" which provides "Subject tothe provisions of this order, all goods areprohibited to be imported into theUnited Kingdom" was made on the basisof the 1939 Act.

Naturally the legislature did not stopthere, because such a general provisionwould have meant the strangulation of acountry such as the United Kingdom.That is why Article 2 immediately goeson to say: "Nothing in Article 1 hereofshall be taken to prohibit the importationof any goods under the authority of anylicence granted by the Board of Tradeunder this article and in accordance with

any condition thereto".

Thus the Minister was empowered toauthorize some importations specificallyand others generally.

After the entry into force on 1 January1973 of the Act of Accession and

pursuant to the general principle of thefree movement of goods laid down bythe Treaty of Rome, the Secretary ofState for Trade and Industry granted a

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general licence for imports (an OpenGeneral Import Licence) on 5 July 1973to take effect on 16 July following.Pursuant to this licence the importationof all "gold articles", or what I will call"gold goods", was authorized. But on 15April 1975 the same Department adopteda measure (Amendment No 10)prohibiting as from 16 April following,except with a specific licence, the impor­tation of gold medals, gold medallions,gold tablets and other gold pieces inpictorial relief or bearing inscriptions aswell as gold coins.It has therefore been established, asmoreover the judge of the court of firstinstance points out, that under thesystem introduced on 5 July 1973 theimportation into the United Kingdom ofKrugerrands, which are goods within themeaning of the 1939 Act, was not subjectto any restriction and that, since 16 April1975, importation of these coins hasbeen subject to a system of specificlicences as importation of goods, anyimportation of these coins incontravention of the said provisionsfalling within section 304 (b) of theCustoms and Excise Act, 1969.

As far as exportation is concerned asimilar trend may be noted.

Pursuant to the Export of Goods(Control) Order 1970 the exportation ofcertain goods is prohibited except underthe authority of a general or specificlicence.

On 20 December 1972 on the eve of

accession the Secretary of State granted ageneral authorization for the export ofmany categories of goods (Open GeneralLicence of 20 December 1972) includingcoins, apparently in order to bring thelaws of the United Kingdom into linewith the provisions of Article 34 of theTreaty. This licence was confirmed on 25June 1973.

However pursuant to two measuresadopted on 5 July 1975 and 20December 1975 the export of more thanten silver coins of the kind at issue

(United Kingdom coins in circulationbefore 1947) was prohibited except witha specific authorization.It has therefore also been established thatafter the accession of the United

Kingdom the exportation of the silvercoins at issue in this case had for sometime been licensed under the 1939 Act

relating to goods; it was perhaps bytaking advantage of these rules that theappellants were able to export between 7August 1974 and 26 May 1975 morethan 40 tonnes of silver coins without

attracting the attention of the customs.

Consequently, if the designation goods,used at the time in the laws of the

United Kingdom, is taken, anyquantitative restriction on imports andexports of the coins in question betweenthe Community as originally constitutedand the United Kingdom, and similarlybetween the new Member States, wasabolished on accession. Measures havingan effect equivalent to such restrictionshad to be abolished by 1 January 1975 atthe latest pursuant to Article 42 of theAct of Accession.

From the point of view of Communitylaw the Common Customs Tariff drawn

up in accordance with the nomenclaturefor the classification of goods (BrusselsConvention of 15 December 1950)provides that coins which are not of thenature of collector's pieces (headingnumber 72.01), like moreover the latterpieces (heading number 99.05) andsigned and numbered bank notes(heading number 49.07), are free ofimport duty. This exemption from dutyenjoyed by coins may be explained bythe wish of each State not to be deprivedof receipts from gold and silver.

III — If the coins in question are in factgoods the second question referred bythe national court is whether certain of

the provisions of Article 36 afford jus­tification for the restrictions in this case.

Although for reasons which I will givelater the answer to this question does not

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REGINA v THOMPSON

appear to be necessary for the determi­nation of the appeal, I submit thefollowing observations on this aspect ofthe matter:

A distinction must be drawn between the

import of Krugerrands and the export ofsilver coins.

(1) As far as concerns the import ofgold coins, and still assuming that theymay be classified as goods, I think thatcontrary to the view of the court of firstinstance, but in keeping apparently withthe prosecution in the court of firstinstance and in any case with theCommission and the case-law of the

Court (in particular the judgment of19 December 1961 in Case 7/61

Commission of the European EconomicCommunity v Government of the ItalianRepublic [1961] ECR 317) the "groundsof public policy" in question in Article36 cannot be effectively invoked.

In fact the concept of public policy usedin Article 36 cannot cover any and everydecision taken for economic reasons, orat least it only refers to considerationswhich, while they are all-important foreach Member State, they are not, or areonly to a lesser extent, of a strictlyeconomic nature. In the Treatyestablishing the European EconomicCommunity the reference to publicpolicy in Article 36 is irrelevant if themeasures to be taken for the preservationof order, for reasons of urgency or ofeconomic expediency are dealt with inother provisions of the Treaty and ifspecific provisions, derogating from thegeneral rules of the Treaty in theinterests of the Member States or of the

Community as a whole, have been pre­scribed for this purpose. I am thinkingparticularly of the provisions of Articles70 (2) and 73 and also of those inChapter 2, "Balance of payment" ofTitle II, "Economic policy" of Part three(Article 104 to 109).

In other words the public policymentioned in Article 36 does not refer to

monetary public policy. On the otherhand I would like to refrain from givingthis concept of public policy a moraltinge and assimilating it to the concept of"public morality" to which the nationalcourt does not seen to have referred.

Assuming that putting surplus incomeinto safe securities, such as monetarygold, cannot be justified by badmanagement of the money market by theStates themselves, and even if theconcept of "public policy" has a certainmoral tinge, I think that the concern toprevent hoarding or speculation fallswithin the scope of monetary publicpolicy, which is dealt with in the specificprovisions to which I have just drawnattention, in particular in Article 104,which provides that "Each Member Stateshall pursue the economic policy neededto ensure the equilibrium of its overallbalance of payments and to maintainconfidence in its currency, while takingcare to ensure a high level ofemployment and a stable level of prices".Hoarding is closely connected withcurrency stability, inflation and deva­luation (Henri Guitton, La Monnaie,1970, p. 276) and "monetary" goldforms part of the balance of payments(C. Maestripieri, Cours sur "La librecirculation des capitaux dans la CEE",1973-1975, p. 18).

As the judge of the court of first instanceacknowledges recourse to public policywithin the meaning of Article 36 itcannot therefore "prima facie" justify therestrictions imposed on the importationof Krugerrands.

(2) The problem, as far as Article 36 isconcerned, of the exportation of silvercoins of the kind at issue is moredifficult. In so far as these coins havebeen "withdrawn from circulation" —and half-crowns have been since the end

of 1969 — it may be asked whether theconcern to retain the bulk of the small

change which is legal tender in theUnited Kingdom may justify therestrictions on their exportation. It may

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OPINION OF MR MAYRAS — CASE 7/78

also be asked whether anotherconsideration — which the national

court moreover has not specificallymentioned — does not have to be taken

into account under Article 36, namely"the protection of national treasurespossessing artistic, historic or archaeo­logical value".

In this line of argument half-crowns fallwithin the concept of "national assets"and it would be legitimate for the capitalappreciation derived from melting downthe quantities exported to ensure for thebenefit of the "public purse" rather thanfor the benefit of private individuals. Butapart from the fact that these silvercoins, originally the property of theCrown, have as it were fallen into the"public sector", the wording of Article36 requires national treasures to have anartistic, historic or archaeological value.Now I doubt whether these coins satisfythose criteria even if, as the UnitedKingdom Government asserts, no licencehas been granted to private individualsunder Section 10 of the Coinage Act1971 to profit by the destruction of thesecoins within the United Kingdom.

Finally, assuming that the silver coins inquestion are in fact goods, their expor­tation does not seem to me to be likelyto destroy confidence in UnitedKingdom currency; this exportation isthe consequence of the loss ofconfidence in this currency (bad moneydrives out good, according to Gresham'slaw) rather than the cause of this loss ofconfidence and grounds of public policywithin the meaning of Article 36 cannotbe effectually invoked under this head.

IV — Nevertheless these considerations

do not dispose of the problem. Althoughsome gold and silver coins are in certainrespects goods which can in some, if notall of the Member States, perfectlylegally be the subject-matter of bankingtransactions, subject to payment of anyVAT which may be chargeable, they aregoods of a very special kind which, as Iam going to explain, could and can be

assimilated "to capital" by reason of thecircumstances and conditions of andmethods used in the transactions of

which they are the subject-matter.I would now like to dispose straightawayof an objection which is bound to beraised against me. The point has oftenbeen made that, although all money isperforce goods, at least to begin with, allgoods have in certain respects from aneconomic standpoint the characteristicsof capital. This is so, for example, in thecase of diamonds, paintings by greatmasters, stamps, silver tableware or evensugar.

(1) But in this category of goodshaving a value as "capital" there aresome goods which have these charac­teristics in a very high degree and whichowing to their small compass and theease with which they can be bought andsold and their durable nature areeminently suited, I would say, to useneutral words, for putting away orinvesting. This immediately brings tomind precious metals, or "monetary"gold and silver, which offer high value ina small compass and have incomparablephysical properties (resistance to deteri­oration, homogeneity, divisibility). Fur­thermore, in the good old days of"bimetallism" or of the "gold standard",gold or silver coinage combined both thecharacteristics of goods and of amonetary symbol. The value of thegoods matched perfectly the value of themonetary symbol since the convertibilityinto "hard cash" of paper money at anytime was guaranteed. Such an approachfurthermore was adopted in the earlynineteenth century (the metallist theoryof John Stuart Mill). According to thisrealistic conception of money as goods,money was only considered to have avalue because it was "just like any othergoods". But nowadays such a conceptionhas been universally abandoned: goodswhich have become a currency are nolonger like any other goods and theadvocates of the theory of nominalismhave had no difficulty in proving this.

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REGINA v THOMPSON

Until we go back to those happy days ofthe gold standard, coins made from thismetal still exist and continue to be

minted; gold (and to a lesser extentsilver) in the form of bars, ingots orcoins is one of the few forms of capitalwhich almost invariably keeps or evenincreases its value.

Gold and especially "monetary gold" isused as an insurance against devaluation.This monetary gold even attracts some"agio" compared with gold bars becauseof the minting involved althoughprimarily because of the great ease withwhich it can be handled.

Consequently, even though transactionsin gold or silver coins which are legaltender take the form of "commercial"

transactions, they may be regarded as aform of investment or, if you prefer, ofputting assets away. In these circum­stances it is not surprising that publicauthorities are interested in this gold andsilver.

(2) The Krugerrand occupies a veryspecial place among the gold coinsofficially quoted and currently dealt in.Although the "Kruger" is officiallyquoted in rands it is not strictly speakinglegal tender since the coin does not bearany indication of its nominal value, apartfrom mentioning in two languages "oneounce of fine gold"; it would be moreexact to say that it is a metal. However itis certainly not sought after so energe­tically for the bearded effigy "UnclePaul" on its obverse or the "springbok"on its reverse side but simply because itweights 33.93 grammes, contains 31.10grammes, that is 22 carats or one troyounce having a gold content of 916 666parts per 1 000. There are two otherreasons for its popularity: at thebeginning of 1976 its premium over itsvalue in gold was only 4 %, the reasonbeing that it is still minted on a largescale. At the same time the marginbetween the selling and the purchaseprice over the counter at the banks is theiowest of all the gold coins (4.14%).

In practice its price fluctuations are thesame as the price differences of the goldingot and this is the characteristic of allcoins which are put away or invested:they do not circulate because they are a"monetary symbol" but because of theirintrinsic value. The krugerrand is "a sliceof an ingot".

During the first four months of 1978some 2.5 million of them have been sold

compared with 800 000 during the sameperiod of the preceding year. Accordingto an advertisement in the "Wall Street

Journal" the Germans and the Swiss buynearly 45 000 Krugerrands each week.This "rush" undoubtedly reflects therenewal of interest shown in the yellowmetal, the growth of the budget deficitincreased by the efforts made to revivethe economy giving rise to fears that therate of depreciation of some currencies(especially at that time the poundsterling) could not be arrested.

The reason why I have laid some stresson these characteristics which the

specialist publications set out is not toinduce Your Lordships to buy someKrugerrands but to show that thenational court clearly cannot fail to takeaccount of them in order to decide thecase before it in view of the date of the

transactions giving rise to the criminalproceedings and the particular circum­stances in which they have been carriedout. We must not forget that the importscovered altogether more than 100kilogrammes of gold.

(3) I find confirmation of the specialnature of gold in the domestic provisionsof the Member State in which the coins

in this case have been "put into freecirculation". In the German Law on

Foreign Trade "Außenwirtschaftsgesetz"of 28 April 1961, gold has a specialposition (Section VI) after Trade inGoods (Section III), Provision ofServices (Section IV) and CapitalMovements (Section V).

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OPINION OF MR MAYRAS — CASE 7/78

According to Article 24 of this lawtransactions in gold between residentsand non-residents as well as the expor­tation and importation of gold may berestricted for the purpose of preventing areduction in the purchasing power of themark or maintaining the equilibrium ofthe balance of payments, withoutprejudice to the restrictions provided forin Articles 8 to 13 relating to trade ingoods.Similarly Article 1 of the Belgian Law of11 September 1962 relating to the im­portation, exportation and transit ofgoods provides: "For the purpose of thislaw:

(a) goods shall mean: everythingregarded as such for the applicationof customs legislation with theexception of minted gold or goldingots, both coin and paper moneywhich are legal tender in Belgium orabroad, and also all securitieswhatsoever, whether Belgian orforeign, public or private whetherthey be in the form of share certi­ficates or bearer securities ..."

Article XX of GATT provides:"Subject to the requirement that suchmeasures are not applied in a mannerwhich would constitute a means of

arbitrary or unjustifiable discriminationbetween countries where the same

conditions prevail, or a disguisedrestriction on international trade,nothing in this Agreement shall beconstrued to prevent the adoption orenforcement by any contracting party ofmeasures:

(I) ... (c) relating to the importation orexportation of gold or silver;"

Similarly Article 12 of the Conventionestablishing the European Free TradeAssociation (EFTA) lays down:"Provided that such measures are not

used as a means of arbitrary or unjusti­fiable discrimination between Member

States or a disguised restriction on trade

between Member States nothing inArticles 10 and 11 shall prevent theadoption or enforcement by any MemberState of measures,

(f) relating to gold or silver."

(4) It is now advisable to find outwhether this ambivalent nature of

monetary gold — both goods and a"security" — universally recognized byeconomists is or is not part ofCommunity law.

(a) As far as the Treaty itself isconcerned Article 67 (1) states that"During the transitional period and to theextent necessary to ensure the properfunctioning of the Common Market,Member States shall progressively abolishbetween themselves" restrictions on

movement of capital.The following articles lay down the time-limits to be complied with and themeasures to be adopted by the MemberStates and the Community to implementthis general principle.The capital here referred to comprises inaddition to payments relating to trade ingoods, services and capital itself, thatcategory of factors of production madeup of "sources of finance" or "financialresources" which are the subject-matterof intra-Community capital transactionsor movements between banks and

financial institutions by book entries(settlements between banks by entries)without being accompanied by anyphysical delivery of the monetarysymbols or coin.

Although that does not emerge from theTreaty nevertheless the possibility cannotbe ruled out that "capital" may beunderstood as comprising certain"securities" having an intrinsic financialvalue, that is to say not only financialassets which indicate the value of the

securities recording the ownership of thecapital, and the actual capital whichserves to indicate the tangibility of

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REGINA v THOMPSON

capital assets as production factors, butalso monetary capital which representsthe value of the capital assets expressedin terms of money.

(b) Although the Treaty itself does notprovide any other particulars on whatmust be understood by "capital" wefortunately have a text whose validity isnot challenged. This text is in the FirstDirective adopted on 11 May 1960 bythe Council, added to and amended by aSecond Directive of 18 December 1962

which are the only general measuresadopted to date by the Council ofMinisters to implement Article 67 of theTreaty apart from the Directive of 21March 1972 on regulating internationalcapital flows and neutralizing theirundesirable effects on domestic liquidity.Even though these texts are in essenceconcerned with putting in concrete formthe principle laid down by Article 67with regard to exchange restrictions withnon-Member countries the definitions

contained in them seem to me to applyalso in the more general context of"capital". The Directive of 11 May 1960only contains obligations imposed uponthe Member States which could confer

rights and impose obligations uponindividuals as far as concerns the capitalmovements set out in List A, B and C ofAnnex I thereto.

The movements of capital set out in ListD of Annex I are dealt with in Articles 4to 7.

Article 4 provides:"The Monetary Committee shallexamine at least once a year therestrictions which are applied to thecapital movements set out in the listscontained in Annex I to this Directive; itshall report to the Commission regardingrestrictions which could be abolished".

Article 5 (1) states in particular:

"1. The provisions of this Directive shallnot restrict the right of MemberStates to verify the nature andgenuiness of transactions or transfers,

or to take all requisite measures toprevent infringements of their lawsand regulations."

Article 6 in effect merely repeats theprovisions of Article 71 of the Treaty.Finally Article 7 provides, inter alia, that"Member States shall make known (tothe Commission) not later than . .. after(its) entry into force . .. anyamendement of the provisions governingthe capital movements set out in List Dof Annex I ...".

This is what the United Kingdom didwhen it notified the Commission on 15

April 1975 of the restrictions on theimportation of gold coins which enteredinto force on the following day and also,on 15 July 1974, of the restrictions onthe exportation of silver coins whichwere imposed on that date. TheGovernment of the United Kingdomadvanced as the reason for the

restrictions on the importation of goldcoins its serious balance of paymentsproblems. As far as concerns therestrictions on the exportation of silvercoins the aim of this government was toprevent the melting down of these coinsabroad for the purpose of extracting thepure metal, a restriction already in forcewithin the United Kingdom, except inthe case of the Royal Mint since suchmelting down could only do harm to thetaxpayer.

As far as I am aware the Commission has

not initiated any procedure against theUnited Kingdom on this ground forfailure to fulfil an obligation under theTreaty.The movements of capital set out in ListD concern, inter alia, "Physical importand export of financial assets". Thisexpression is set out in annex II whichforms an integral part of the directive(Article 10) and covers as well as"securities" (not included under TV)"means of payments of all kinds" and"gold", which are suited for short termtransactions of a particularly volatilenature.

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Thus, even though the categories ofcapital falling within Article 67 (1)primarily cover tangible and intangiblefinancial assets, the possibility cannot beruled out, in the light of the directive,that this article also refers to "monetary"capital specified in List D.

In this field of terminology I would addthat the English word "assets", to whichthe French word "valeurs" in thenomenclature annexed to the directive

corresponds, is rendered in French inother Community texts by the words"capital" "capitaux". Let me quote theexpressions "capitaux d'exploitation"(working assets), "revenus des capitauxmobiliers" (income from capital assets),"transfert de capital à l'intérieur et àl'extérieur" (transfer of assets at homeand abroad), "formation de capital fixe"(fixed asset formation).

(c) Finally, having regard to the classi­fication of the transactions at issue Iwould like to endeavour to state how

"monetary" gold and silver are treatedfor the purpose of turnover tax.Under the common system of a uniformbasis of assessment of value added tax

the supply of goods or services effectedfor consideration within the territory bya taxable person acting as such and theimportation of goods and the obtainingwithin the territory of the supply ofservices shall be subject to this tax in theMember States (Article 2 of the SixthCouncil Directive of 17 May 1977 on theharmonization of the laws of the

Member States relating to turnover taxes— Common system of value added tax:uniform basis of assessment.)It must be remembered that this directive

is in keeping with the aim of creatingconditions for the free movement of

goods, services and capital betweenMember States.

The Commission's proposal submitted tothe Council on 29 June 1973 (OfficialJournal C 80 of 5 October 1973)provided that the Member States shall

exempt, as well as certain activities of ageneral nature, "banking operations"and in particular dealings in currenciesother than for collection, and in gold tobe used as coin and credit transfers

(Article 14 B (h)).The aim of this measure was to abolish

zero rating (involving the retention ofthe right to deduct) in order to reducethe distortions of international

competition. The reason for the measureis that banking transactions are notconcerned with the goods; although theattendant transactions are in some

respects of a commercial nature inrespect of which commission is chargedfor services rendered, they are generallyregarded as being in fact transactionswhich do not add any value to the actualoperation, for example to the amountwhich is the subject of credit or a loan.Value added tax is a tax on consumptionwhich only applies to products andservices and transactions in gold to beused as coin and does not fail within thisdefinition.

In the Commission's Amendments to the

proposal, presented by the Commissionto the Council on 12 August 1974, goldto be used as coin [monetary gold] wasdefined as "gold of a standard of at least900/1 000, for authorized financialinstitutions".

Nevertheless, although the actualdealings in currencies other than forcollection and in gold to be used as coin,as thus defined, were exempted in thatthere was no physical delivery of the"goods" in its normal commercialmeaning, according to the last version ofthe text proposed by the Commission tothe Council "this exemption shall notcover 'supplies ofservices' relative to suchtransactions".

Article 13 of the text finally adopted bythe Council on 17 May 1977 provides:

"B. Without prejudice to otherCommunity provisions, MemberStates shall exempt (by 1 January1978 at the latest) the following

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REGINA v THOMPSON

under conditions which they shalllay down for the purpose ofensuring the correct and straight­forward application of theexemptions and of preventing anypossible evasion, avoidance or abuse

(d)

(4) transactions, including nego­tiation, concerning currency,bank notes and coins used as

legal tender, with the exceptionof collectors' items; "collectors'items" shall be taken to mean

gold, silver or other metal coinsor bank notes which are not

normally used as legal tender orcoins of numismatic interest".

Thus dealings in collectors' items, evenover bank counters, are regarded ascommercial transactions subject to VAT;on the other hand within the Member

States dealings in "monetary" gold andsilver coin are exempted. Furthermorefor the purpose of stimulating capitaltransactions, the negotiation of bankingtransactions or of credit is itself

exempted specifically from turnover tax.It must indeed be noted that the text no

longer mentions gold to be used as coinbut currency used as legal tender thushaving in view in particular gold or silvercoins which are "normally used as legaltender".

The importation and exportation of goldby Central Banks which are undoubtedly"capital movements" giving thisexpression a wide meaning are exemptedby virtue of Article 14 (1) (j) and 15(11).

Therefore the question to be determinedis what is meant by "currency used aslegal tender" and "gold and silver coins.. . which are not normally used as legaltender ....". This question is not onlyrelevant for the purpose of avoidingdistortions of international competitionbut also from the point of view of theCommunity's own resources, since, as

Your Lordships are aware, a proportionof VAT has at present to be channelledinto Community funds: compliance withthe time-limit of 1 January 1978 auto­matically entails the allocation to theEuropean Economic Community of aportion of VAT receipts as its ownresources and is therefore a prerequisiteof its financial independence. That is amatter for the Court of Auditors toconsider. Moreover this directive could

confer rights and impose obligationsupon individuals.

The Commission's replies to yourquestions to it on this point seem to meto be very vague and incomplete if notindeed inaccurate. If I have correctlyunderstood the explanations which havebeen given it would appear that only twoMember States have to date compliedwith the provisions of the SixthDirective.

In the Grand Duchy of Luxembourg, theMember State where the Court has its

permanent residence, pursuant to Article1 of the Grand-Ducal Regulation of 24December 1977,

"Exemption from value added tax shallonly apply:

(2) to deliveries and imports of goldcoins which, when the transaction iseffected, are legal tender in theircountry of origin;

(3) to deliveries and imports of goldcoins other than those referred to at

(2) above, in so far as such coins areofficially quoted and do not consistof collectors' items of a numismaticnature ...".

I have satisfied myself that dealings inkrugerrands are in fact exempted.Moreover the Commission tells us that

the Federal Republic of Germany hasconsidered charging VAT on dealings ingold coins, which, although they arelegal tender, that is to say are monetarygold, are traded mainly for their value as

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a precious metal or for their numismaticvalue. This is aimed especially at certaincoins used as legal tender in theircountry of origin such as krugerrands.In the context of these proceedings it isnot for Your Lordships to determinewhether and by whom the CouncilDirective of 17 May 1977 has not beencorrectly applied.

For my own part' I will merely confirmthat at the present time krugerrands fallwithin the definition of monetary gold;that dealings in, which includes thenegotiation of, these coins in theMember States where such negotiation ispermitted are exempted from VAT onthe ground that the coins in question are"legal tender in their country of origin"or coins "officially quoted"; furthermorethat no action for failure to fulfil an

obligation under the Treaty has beeninitiated by the Commission under thishead; that the English silver coins arelegal tender in their country of origin;that all those concerned have been

involved, at least in part, in an operationto which the parties gave the semblanceof a "bimetallic barter" — which did noteven materialize since the AGOSI

company still claims to be the owner of1 550 Krugerrands — and that the silvercoins are in any case "means ofpaymentof all kinds" within the meaning of the1960 Directive.

If I accept that Krugerrands are "legaltender", at least in their country oforigin, the same reasoning must apply tosilver coins of sixpence, one shilling andtwo shillings, which are at least "de jure"means of payment, even though it wasnot the nominal value of these coins thatinterested AGOSI, as well as half crownswhich can still be changed at the Bank ofEngland and which have been used, atleast partially, "de facto" as means ofpayment.

On the other hand dealings in collectors'items of a numismatic nature are subjectto VAT, their character as "goods"prevailing over their character as

"capital", although the boundarybetween numismatics, jewellery and"assets put away" is at times looselydrawn.

V — It is advisable now to return to the

implications of Articles 67 and 71. Thelatter provides that:"Member States shall endeavour to avoid

introducing within the Community anynew exchange restrictions on themovement of capital and currentpayments connected with suchmovements, and shall endeavour not tomake existing rules more restrictive"than they were when the Treaty enteredinto force, that is to say in the case ofthe United Kingdom, before 1 January1973. According to the second paragraphof the said article the Member States

"declare their readiness to go beyond thedegree of liberalization of capitalmovements provided for in the precedingarticles in so far as their economic

situation, in particular the situation ofthe balance of payments, so permits". Itis clear that neither of these two

provisions creates rights for the benefitof individuals.

Article 67 makes the progressiveabolition of restrictions on the movement

of capital subject to one conditionlimited in time and one permanentcondition. By admitting that thetransitional period, applicable for theelimination of measures having an effectequivalent to quantitative restrictions onthe importation and exportation of goods,also applies to the abolition ofrestrictions in connexion with the free

movement of capital, that is to say that itbe completed by 1 January 1975, thestipulation "to the extent necessary toensure the proper functioning of theCommon Market" continues to applyeven after the expiry of this period. Thesame criterion of ensuring "the properfunctioning of the Common Market"must also influence the Community'sactivities for example in the field of theapproximation of the laws of MemberStates (Article 3 (h)).

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Consequently, according to Article 67, ifafter the entry into force of the Act ofAccession and after the expiry of thetransitional period, for which it provides,any restrictions on the movement ofcapital remain in being, their retentiononly contravenes the Treaty if thisabolition is necessary to ensure the properfunctioning of the Common Market. Iwill refrain from defining my position onthe question whether the properfunctioning of the Common Marketrequires that "assets put away" and"investment", which were and are stilleffected and necessarily permitted by thelaw in force within the frontiers of each

Member State, may be made possible atCommunity level and without anydiscrimination through the freemovement of monetary gold in theremainder of the Community put intocirculation in one Member State; I preferto leave this point to be determined byYour Lordships.

The fact that, within some MemberStates, the coins in question may befreely dealt in and that all the MemberStates support hoarding and speculationby "reminting" gold coins amountsclearly to discrimination a little like thediscrimination in the jugdment of 4December 1974 in Case 41/74, Yvonnevan Duyn v Home Office [1974] 2 ECR1337, but, Article 67 specifically refrainsfrom excluding the retention even afterthe expiry of the transitional period, of

discriminatory treatment based on thenationality or residence of the parties, oron the place where the assets are putaway, if the removal of such discri­mination is not necessary to ensure theproper functioning of the CommonMarket.

Therefore there is no doubt that,although the krugerrands and silver coinsin question are only the physical "sub­stratum" of capital movements, theappellants can gain no advantage byinvoking Article 67 and the expiry of thetransitional period does not affect thecontinuing validity of the restrictionflowing from the stipulation that theproper functioning of the CommonMarket must be ensured.

Finally it is for the national court todetermine whether the financial

movements which accompanied the circu­lation of the coins in question fall withinthe class of those which relate to actual

trade in and movement of goods in theordinary meaning of this expression, butit seems to me that, even if the UnitedKingdom Government has used anunorthodox but very effective instrument(the orders in implementation of the1939 Act which govern the movement ofgoods) to regulate these monetarytransactions, it is no less true that thisobjective could be lawfully attained inthe context of Articles 67 and 104 of the

Treaty.

In these circumstances it does not seem to me to be necessary to answer thelast question referred to the Court and I submit that Your Lordships shoulddeclare that:

(1) Capital within the meaning of Community law must also be taken tomean gold and silver coins which are legal tender or "means of paymentof all kinds";

(2) Even after the expiry of the transitional period referred to in Article 42of the Act of Accession and notwithstanding Articles 73 and 106 of theTreaty the new Member States only have to abolish between themselves

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and in their relations with the Community as originally constitutedrestrictions on trade in capital as thus defined belonging to personsresident in the Member States, as well as discriminatory treatment basedon the nationality or the residence of the parties or the place where suchcapital is situate to the extent necessary to ensure the proper functioningof the Common Market.

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